Using a dataset detailing FDI flows from market economies to transition economies we examine two aspects FDI inflow determinants given insufficient prior attention: labour costs and institutional development. We find low unit labour costs and aggregate institutional development enhance FDI receipts. Examining disaggregated development indicators identifies specific institutions that positively influence FDI: private sector development, banking sector reform, price, foreign exchange and trade liberalisation, and legal development. Conversely we find non-bank financial sector development and competition policy do not enhance FDI. Our analysis highlights that Russian FDI receipts have suffered from a gap between extensiveness and effectiveness of legal reform. JEL Classification: F2, P3, F23

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